Inflation and rising living costs push seniors into riskier investments

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Despite the rising cost of living and the need for cash, even the simple concept of investing confuses many people, which is why a recent poll by CIBC Investor’s Edge found that nearly four in 10 Canadian investors aren’t sure what ETFs stand for or what dollar-cost averaging is.

Overall, 48% admit that they do not invest new money every year, and only 56% say they are comfortable investing their own money, with 65% citing a lack of knowledge and 57% citing fear of losing their money.

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Despite fears and lack of knowledge, four in five say knowing how to invest is important and being more informed helps them feel more confident.

Luka MarjanovicManaging Director and Head of CIBC Investor’s Edgeshares his views on what investors should know about investing.

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Q: How do people’s investment habits differ across age groups, and how important is it for older Canadians to stay invested or even start investing?

aThe cost of living is a major concern for Canadians of all ages, with 71 per cent of investors found to be investing to combat the rising cost of living. There are some differences in the approaches taken by different demographics.

The data shows that women are more likely than men to hold GICs (Guaranteed Investment Certificates), are less likely to hold stocks, ETFs, mutual funds, and are statistically less likely to hold cryptocurrencies. People over the age of 55 are less likely to hold ETFs or cryptocurrencies, but are significantly more likely to hold GICs than younger generations. The youngest generation, 18-34 year olds, are significantly less likely to hold mutual funds.

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While risk plays a role in any such decision, staying up to date on the latest trends in education and investment is also an important factor.

Q: The traditional rule of thumb is to invest more in fixed income as you get older, but has this changed now that we’re living longer and need more money?

a: Fixed income investments have long been an attractive option for older adults looking to lower their risk profile, but as interest rates have fallen, this demographic’s risk tolerance has increased, leading to increased interest in stocks and ETFs.

Rising life expectancies and skyrocketing living costs are reducing the purchasing power of savings among older generations, leading them to seek investment avenues that take on greater risk but offer higher potential returns.

A 2023 CIBC poll found that nearly two-thirds of Canadians who aren’t yet retired are worried about running out of money during retirement, and of those, only 41 per cent are confident they have saved enough to reach their retirement goals.

Q: What are some of the investment themes you are focusing on?

aInterest in GICs and fixed income products has declined since hitting record highs late last year, with interest in stocks and ETFs growing given market trends and expectations of rate cuts.

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Canadians overall are eager to become more educated about investing, with 79% saying it’s important to know how to invest and 73% saying they would like to learn more, which is perhaps why more clients are adopting a combination of direct and managed investing.

(by the way, ETF Exchange traded funds are a type of mutual fund that trades on a range of stock indexes, sectors, themes, and even Unlisted stocks You can invest at a much lower cost than with mutual funds. Dollar-cost averaging is the practice of investing the same amount of money on a regular basis, regardless of the investment price. This strategy is designed to spread out the amount you invest over time so you don’t have to worry about timing the market.

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